Early results point to Italy elex gridlock

Former Premier Silvio Berlusconi exits a booth as he votes in a polling station in Milan, Italy, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Antonio Calanni)
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Former Premier Silvio Berlusconi exits a booth as he votes in a polling station in Milan, Italy, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Antonio Calanni)
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A torn electoral poster shows center-right coalition leader Silvio Berlusconi in Rome, Monday, Feb. 25, 2013. Italy's crucial elections appear to be heading toward gridlock, initial results show, with the center-left forces of Pier Luigi Bersani headed toward victory in the lower house of Parliament and the camp of former premier Silvio Berlusconi gaining the upper hand in the equally powerful Senate. The upstart protest campaign of comic-turned-politician Beppe Grillo was also showing a stunningly strong result in both houses of the legislature, confirming its surprise role as a force in Italian politics. (AP Photo/Gregorio Borgia)— AP

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A torn electoral poster shows center-right coalition leader Silvio Berlusconi in Rome, Monday, Feb. 25, 2013. Italy's crucial elections appear to be heading toward gridlock, initial results show, with the center-left forces of Pier Luigi Bersani headed toward victory in the lower house of Parliament and the camp of former premier Silvio Berlusconi gaining the upper hand in the equally powerful Senate. The upstart protest campaign of comic-turned-politician Beppe Grillo was also showing a stunningly strong result in both houses of the legislature, confirming its surprise role as a force in Italian politics. (AP Photo/Gregorio Borgia)
/ AP

Nuns leave a polling station after voting in downtown Rome, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Andrew Medichini)— AP

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Nuns leave a polling station after voting in downtown Rome, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Andrew Medichini)
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A woman casts her ballot for the Italian Lower Chamber, in Piacenza, Italy, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Marco Vasini)— AP

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A woman casts her ballot for the Italian Lower Chamber, in Piacenza, Italy, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Marco Vasini)
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A man casts his vote for the Italian Senate, in Piacenza, Italy, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Marco Vasini)— AP

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A man casts his vote for the Italian Senate, in Piacenza, Italy, Sunday, Feb. 24, 2013. Italy votes in a watershed parliamentary election Sunday and Monday that could shape the future of one of Europe's biggest economies. (AP Photo/Marco Vasini)
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Comic-turned-politician Beppe Grillo, center, is photographed as he arrives at his polling station to cast his vote, in Genoa, Italy, Monday, Feb. 25, 2013. Italians voted for a second day Monday in a national election that will determine whether they are prepared to stay the course of painful economic reform or send a message of discontinuity to the political class that led the country to the brink of disaster by rallying around a protest party. (AP Photo/Fabio Palli, Lapresse) ITALY OUT— AP

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Comic-turned-politician Beppe Grillo, center, is photographed as he arrives at his polling station to cast his vote, in Genoa, Italy, Monday, Feb. 25, 2013. Italians voted for a second day Monday in a national election that will determine whether they are prepared to stay the course of painful economic reform or send a message of discontinuity to the political class that led the country to the brink of disaster by rallying around a protest party. (AP Photo/Fabio Palli, Lapresse) ITALY OUT
/ AP

ROME 
Italy's crucial elections appeared to be heading toward gridlock, initial results showed Monday, with the center-left forces of Pier Luigi Bersani moving ahead in the lower house of Parliament and the camp of former premier Silvio Berlusconi gaining the upper hand in the equally powerful Senate.

The upstart protest campaign of comic-turned-politician Beppe Grillo was also showing a stunningly strong result in both houses of the legislature, confirming its surprise role as a force in Italian politics.

The unfolding murky result raised the possibility of new elections in the coming months and bodes badly for the nation's efforts to pass the tough reforms it needs to snuff out its economic crisis. After surging in the wake of exit polls, Milan's main stock index slumped with first projections before closing up slightly.

The Italian election has been one of the most fluid in the last two decades thanks to the emergence of Grillo's 5 Star Movement, which has capitalized on a wave of voter disgust with the ruling political class and harsh austerity measures imposed by technocrat Premier Mario Monti - who has fared miserably in the elections.

The decisions Italy's government makes over the next several months promise to have a deep impact on whether Europe can decisively stem its financial crisis. As the eurozone's third-largest economy, its problems can rattle market confidence in the whole bloc and analysts have worried it could fall back into old spending habits.

Pier Luigi Bersani's coalition - which has shown a pragmatic streak in supporting the tough economic reforms spearheaded by Monti - was leading in the lower house of Parliament, according to exit polls.

Bersani's coalition has taken 35.5 percent of the vote for the lower house of parliament, ahead of the center-right coalition under Berlusconi with 29 percent, the polls indicated. The poll by Tecne has a margin of error of plus or minus 2.5 percentage points.

In the Senate, projections by the Piepoli Institute for RAI public TV showed Berlusconi's coalition slightly ahead with 31 percent to Bersani's 30 percent. Grillo's movement had 24.6 percent and Monti's centrist forces 9.4 percent. Sky's Senate projections showed Berlusconi with a two-point lead over Bersani, and Grillo with 25 percent.

Bersani's party would have to win both houses to form a stable government, and given the uncertainty of possible alliances, a clear picture of prospects for a new Italian government could take days. It is all but impossible that Bersani would team up in a "grand coalition" with his arch-enemy Berlusconi.

Italy's borrowing costs have reflected the optimism that the country will stick to its reform plans.

The interest rate on Italy's 10-year bonds, an indicator of investor confidence in a country's ability to manage its debt, fell to 4.19 percent in afternoon trading Monday. Last summer, at the height of concern over Italy's economy, that interest rate was hovering at about 6.36 percent.

Bersani, a former communist, has reform credential as the architect of a series of liberalization measures and has shown a willingness to join with Monti, if necessary, to form a stable government. But he could be hamstrung by the more left-wing of his party. And Grillo's stunning surge shows Italians are fed up with painful economic cures.

Monti's centrist coalition was having a terrible election with 9.5 percent in the lower house, according to Tecne's exit polls.

Analysts saw two big stories in Italy's election.

"The first is the big surprising increase scored by the 5 Star Movement, and the other is the disappointing result" of Monti's coalition, said Massimo Franco, a columnist with Corriere della Sera.

Turnout was 75 percent, down nearly 6 percentage points from the rate in the last national election in 2008. Experts say a low turnout will hurt the mainstream parties. Usually around 80 percent of the 50 million eligible voters go to the polls.

Under Italy's complex electoral law, how the upper chamber's seats are divvied up depends on how the candidates do in Italy's regions, since the more populous regions, like Lombardy, get a greater share of the seats.

Whether the center-left takes Lombardy might well decide if the coalition could stitch together a coalition with a workable majority in the Senate, as well as in the lower Chamber of Deputies, where the regional factor doesn't exist.

Berlusconi, who was forced from office in November 2011 by the debt crisis, has sought to close the gap by promising to reimburse an unpopular tax - a tactic that brought him within a hair's breadth of winning the 2006 election.

Monti, respected abroad for his measures that helped stave off Italy's debt crisis, has widely been blamed for financial suffering caused by austerity cuts.

Grillo's forces are the greatest unknown. His protest movement against the entrenched political class has gained in strength following a series of corporate scandals that only seemed to confirm the worst about Italy's establishment. If his self-styled political "tsunami" sweeps into Parliament with a big chunk of seats, Italy could be in store for a prolonged period of political confusion that would spook the markets. He himself won't hold any office, due to a manslaughter conviction